Refinance Applications Decrease

The rise in mortgage interest rates over the past several months is having a clear
impact on the mortgage side of the market.

The Market Composite Index (MCI), which is part of the Mortgage Bankers
Association’s (MBA) Weekly Mortgage Application Survey (in this case for the
week ending August 23, 2013) dropped 2.5 percent on a seasonally adjusted
average from the previous week. On an unadjusted basis the Index fell 3.0
percent for the same period. The MCI is a measure of mortgage loan application
volume that includes both purchase and refinance applications.

The Refinance Index fell by a full 5.0 percent from the previous week. The
Refinance Index has fallen 64.2 percent from its recent peak during the week of
May 3rd. The MBA data shows that the refinance share of mortgage activity has
decreased to 60 percent of total overall applications falling from 61 percent the
previous week, and is the lowest refinancing rate since April 2011. As recently
as May 1rst of 2013 mortgage refinances were 75 percent of total mortgage

In the week prior to August 23rd (ending on August 16), overall mortgage
applications had fallen by 4.6 percent from a week earlier, with the Refinance
Index falling by a full 8.0 percent. With the increase in mortgage interest rates
from an historic low of 3.35 percent in early May to its current 4.8 percent on
conforming 30-year fixed-rate loans (loans of $417,000 or less), mortgage
refinance activity has continued to slow. Mortgage applications have now fallen
in fifteen of the past seventeen weeks, with decreased refinance activity leading
the way.

The seasonally adjusted Purchase Index increased by 2% from the previous
week. The unadjusted Purchase Index increased by 0.3% for the week and is up
about 6% year-over-year. Purchase applications remain higher than they were a
year ago.